T-Minus Two Months Until The $500 Billion Rolling Debt Ticking Timebomb Goes Off

Ever since the famous Stanley Druckenmiller Op Ed published in early May, which called for an outright default of the US, saying it would not be
the end of the world, and in fact the US would emerge stronger as a
result of finally taking the first steps to getting its fiscal house in
order, there has been a visible shift regarding the US debt ceiling discussion, with republicans (so far) digging in and refusing to budge on the issue. After all, on the surface Druckenmiller is absolutely correct: with interest rates near record lows for the past 3 years, interest payments would be manageable for a long time even if general rates were to surge due to the Treasury's fixing of low cash coupons over the past 3-4 years, amounting to about 20-30% of all annual tax receipts. There is however one very big problem with this argument, one which we pointed out back in April 2010 when we said that "What people don't realize is that...unless the UST can roll its debt not on a monthly
but now weekly basis in greater and greater amounts, the interest rate
doesn't matter. All it takes is one semi-failed auction and it's game over as hundreds of billions in bills become payable." Enter the always forgotten maturing debt argument. And as a just released presentation by the Bipartisan Policy Center titled "Debt Limit Analysis" reminds us, aside from the actual deficit funding math, which is that in August there is a $134.3 billion cash shortfall that has to be funded with debt, there is a far greater risk. Or, put numerically, 467.4 billion far greater risks. This is the amount of debt that matures through August 31, and has to be rolled over or the US is bankrupt... in every sense of the word. Once again, America's politicians and media get broadsided by the definition of gross versus net. Because, in reality, the inability to issue more debt post August 3 means a halt to all new debt issuance. Which, unfortunately because it means Geithner's scaremongering is actually correct, would imply the end for the debt ponzi.

Below is the maturity schedule in August from the BPC:

And their commentary, which recaps what we said 14 months ago:

Treasury must “roll over” almost $500 b in debt that matures during August 2011

New debt is issued and the proceeds are used to repay the maturing debt plus interest due

Treasury will require market access throughout August to avoid defaulting on maturing debt

And that's not it. On a Net basis, there is in addition another $134.3 billion in deficit that must be satisfied somehow. Alas, after August 3rd it will become impossible to plunder savings accounts going forward which means a game over in the kick the can down the road game:

Breaking down the spending side:

The BPC's observations on what happens on August 4 absent a deal are rather spot on:

If the debt ceiling is not raised by August 2, all three ratings agencies will put the United States on watch for a downgrade, at a minimum. Fitch (6/8/11):

“If the debt ceiling is not raised by the [X Date] and timely and full payment of its obligations, including Treasuries, is not secure, the U.S. sovereign rating will be placed on Rating Watch Negative.”

An actual downgrade would cause major losses among holders

Even without downgrade, it is likely that rates would increase, perhaps significantly

Less likely, but possible, that Treasury would lose market access during such an unprecedented event and default

As a reminder we are now 32 days away from D-Day, and about 60 days from the need to fund half a trillion, all of it with new gross debt issuance.

To date, there has been no progress in D.C. at all. Will there be progress in the next 4 weeks? They better, or as demonstrated, the extend and pretend game, contrary to the well-meaning intentions of the likes of Drucknemiller, is about to come to a very violent end.

The Republican's! who I hate! are going to bring about Change we all can believe in! I hope Ya'll got your Guns! Ammo!! and Food!!! ready.. with fall back positions! The democrats and the republicans are going to destroy this Country so that it can be made over in a more Bank Friendly Format! LULZ!! Internet Switch is a comin boyz!

Rolling over old national debt is like issuing new debt. It has all the trappings of issuing new debt except it doesn't increase the size of the national debt.

I thank God everyday for the complete and total economic collapse of the USA.
When we finally default, the rest of the world will cut us off from trade with them and we will get our manufacturing jobs back because we need replacement parts for our shit.
Default is a win win for the .

And if default really would do that to the usa then i think we can all safely say that an agreement will be reached where the politicos can save it up for another day with the can kicked down the road yet again.

It doen't feel right yet... these people are the lowest of the low, they'll keep kicking until the wheels are totally off for all to see.

Quix, I heard you Quixit in des-gust a few weeks ago. Didn't you? But this place is like crack eh? Keep coming back fro more.

And perhaps your question should be will the USD trade for anything of value. it hold's no value in and of itself.

My sign reading, batting a decent average as I type, says we will see major dislocations between tnow and July 15th, with July 16th as a key date.

In the light of what is to unfold, whether in the Nuclear Mid-west or freak heat for snow-melt, reality will trump all this nonsense soon. We need look no further than Fukushima and the rolling disaster signs in the US.

Sorry, don't give two-bits about the opinion of some H1B wannabe...The rumours of my departure have been greatly exaggerated ;-)

Only concerned with hard asset value internally within the former USofA, not looking to purchase foreign trinkets or pathetic attempts at labour.

Since I moved my U$D holdings out of T-Direct, I'm sincerely hoping the dollar maintains par against 'MeriKan Ponzi housing schemes, but I'm starting to worry that the huddled masses will miss the opportunity to sell their inflated assets before 2012 Obamageddon...

Too bad none of former US patriots have a crystal ball!

P.S. Just curious, did you have your Indian piece of ass come to the US on a tourist visa - Like millions of other H1B temp visa slaves - and did you make her pop out a bambino so you and your lil' tribe could claim 'MeriKan "citizenship"?

So what if you wanted a monetary system that was different than the one we have now?

After the default we could try one that Ron Paul could describe. Imagine that, a President who could actually describe to the American people from his own mouth not reading a teleprompter, what a new monetary system we should use and be like, in great detail. What other man on the planet Earth could copy what Paul could actually do?

what I think will happen is a chance to rebuild a limited government with true individual liberty and personal responsibility for all.

Of course the next ten years or so might not be too pleasant, but you can't make an omelete without smashing a few eggs and blending them up, adding a little cream and bacon. I always think a little bell and jalepeno pepper works great too.

My prediction of what will happen unfortunately is they will raise the debt ceiling, and in the process of doing that the Reps will win at pushing for austerity. The game is the Reps ask for austerity, the Dems fight, but lose. They want us as cheap labor. They want to make us all poor, so we will be desperate and cheap.

Not before time for an asset firesale & not talking Ukranian
hooker bitches in the Hamptons. Greek style. US Sell your gold
( Hahmmm ), sell Manhattan, sell everything possible until
there is a few trillion available to pay down the steaming
debt.

This premise, like that super bowl commercial is rediculous. If the US defaults on the debt, EVERYONE will drop treasuries, including the Chinese. What happens afterwards is anybody's guess, but it won't end with hoards of angry Chinese demanding payment due. But it might end with hoards of BMW drivers walking for a change.

None of this apocalyptic stuff is going to happen...yet. First, both parties are posturing, playing to their constituencies, special interests, group entitlements. There'll be a deal, mid- to late-July, involving Xtrillions in "spending cuts" (over the next 10 years....), none of which will ever actually occur, and some token, nuisance increases in taxes and fees. That's all; oh, almost forget, Boner will have a good cry at the signing ceremony. Then back to the Universal Ponzi for maybe another 12 months. More important reason it's not going to happen...yet...is that I am still insufficiently stockpiled and weaponized.

mark-to-myth total us assets are us$75tril.....while actual value is what you can get for cash.....so who has $75tril in credit to buy our assets...oh wait...we sell the assets to ourselves...? right.....the 'we are the richest nation on earth' crap is wearing a little thin.....

Tax Breaks for Corporations to Undermine our National Stability!! Corporations were Paid to Strengthen OUR! ENEMIES!!

"We the People" pay for Corporations (Subsidies) to NOT GROW FOOD!!

America has Been GUTTED!! anyone who can NOT see that has not looked at the numbers or trends!

And!! Most of the Sheep still think it is the Republicans or the Democrats! They BOTH!! have entertained the Sheep all the while sending jobs to our enemies! all the while passing out money to the biggest Lobby(s)!

I would say wake up.. but everyone has a dog in the fight or is to, too busy watching dancing with the starz or! my personal fav!! are retired and dont want to deal with it.. they just want to enjoy their golden years and let the next group deal with the mess they left us in!

50,000 jobs a month to the Chinks??? so that our numbers could be weak?????

What the fuck is your point? that we only have 120% Leverage Against every Dollar and China has 1,200% leverage? Yeah, I quote that shit all day every day but it dont fucking help us with 1% growth of GDP no does it???? their growth came at the cost of our Growth.. Our Growth was sold to China!!! for Lobby Dollars? What the FUCK?? and the perma-sunshine crowd wants to believe this shit will work out well? given the fact that your quip was positive I will assume that you just dont have the first clue when it comes to operating a fucking calculator or what a forward looking statement smells like.

So, in a nutshell, you are saying that Washington DC, corporate america, and all of their lobbyists have sold this country out-lock, stock, and barrel. Until such time that we peons round these traitors up and frog-march them to the nearest guillotine we can just expect more of the same.

However after the celebration we would merely form the neorepublican party and the neodemocratic party because I am doubtful that socialists and libertarians could agree how to govern the country once we rid ourselves of the current traitors.

Treason is specifically defined in the Constitution and is the only crime so defined. Article III Section 3 delineates treason as follows:

“Treason against the United States, shall consist only in levying War against them, or in adhering to their Enemies, giving them Aid and Comfort. No Person shall be convicted of Treason unless on the Testimony of two Witnesses to the same overt Act, or on Confession in open Court.

The Congress shall have Power to declare the Punishment of Treason, but no Attainder of Treason shall work Corruption of Blood, or Forfeiture except during the Life of the Person attainted.”

Not quite sure what that all means exactly, but obviously we need two witnesses first – Anybody ?

Kind of ironic that what comprises this country was basically taken from them injuns, and now "we" are going to lose it. You think the international 'invaders' that'll take away this country will name soccer teams after americans? The "fatasses" or maybe "trailer trash"??? sounds like a good name for a soccer team. Yuppies, maybe? Or Flag Suckers might be a good name, too.

Debt ceiling? we dont need no stinking debt ceiling: NEW YORK (CNNMoney) -- Amid fears the United States risks default if lawmakers don't raise the debt ceiling on time, some are suggesting President Obama could save the day by big-footing Congress. How? By invoking the Constitution anddirecting Treasury Secretary Tim Geithner to keep borrowing even if it means going past the statutory borrowing limit. Really? They say default -- and by extension, the debt limit -- violates the 14th Amendment

Game of chicken, blinking will eventually occur here. I think the details have already been worked out, the rest is just theatre. The relevant players have already been purchased on both sides, and there is no way in hell a default happens.

Game of chicken, blinking will eventually occur here. I think the details have already been worked out, the rest is just theatre. The relevant players have already been purchased on both sides, and there is no way in hell a default happens.

Yup!

They will do what they have always done. Those droids never change their stripes. Then, suddenly, they realize how bad they screwed up and panic, like Paulson Sept. 2008 nightmare, raid the cookie jar sneak attack.

August will come and go. The European "crises" will have passed and it will be time to by those new fall fashionsand another season of Grey's Anatomy.

Kick the can, baby. Kick it hard.

While there is a chance of the world getting through its troubles, I hold that a reasonable man has to behave as though he were sure of it. If at the end your cheerfulness in not justified, at any rate you will have been cheerful.H. G. Wells

Throughout his career, Franklin was an advocate for paper money, publishing A ModestEnquiry into the Nature and Necessity of a Paper Currency in 1729, and his printer printed money. He was influential in the more restrained and thus successful monetary experiments in the Middle Colonies, which stopped deflation without causing excessive inflation. In 1766 he made a case for paper money to the British House of Commons.

It does amaze me though that it took humanity thousands of years (until Franklin) to figure out that if you built a fire in a metal box you'd get much more heat out of it (although the Russians had small ceramic stoves that effectively did the same thing).

If we already assume rational, fair and mutualistic actions by the leaders, then what for do we even need the pretense of democracy (pure representative democracy, isn't democracy in any practically significant way)? I mean, by that logic benevolent dictators should be the best bet?

Or is that just another one of those "split worldview" cases of scientists and engineers?

So far, it appears the majority of money and economic stability, is initially not taken by the public, but by those who control the gov.

In any case, a "democracy", where the "democratic" part consists of people voting for people to lead a country, and those people being made immune to consequences of their own actions, and where people have no way to affect policies directly - is at best "democracy" by word, and none by reality.

If the government didn't have any money, no one would be interested in lobbying it or stealing from it. Not a perfect solution, but voluntary association and individual liberty with someone around just to maintain the rules of the game (and nothing more) would be austere, but it prevents the problem of corrupted government from ocurring.

How can the government be worth no lobbying money, if it is capable of doing anything significant? Or are we going to monitor the wealth of politicians and ex-politicians? If yes, then this specific measure has my "go ahead"... i'm not sure if it will work, but i guess it cannot hurt.

Okay. Hmm, i'll ignore for now that even "small decisions" are worth something, because there is a more pressing matter:

How would things be addressed, that are inter-state? Things that affect the entire "federation"? After all, if there were no such things, there would be no point to the federation, and states may as well be totally souvereign nations. So, how are such "hollistic" matters handled, especially regarding trade conventions (which is just a nicer word for "regulation")?

Would it be addressed purely by consensual cooperation between states (something like a "forum" where they can discuss cooperation and alliances between states on topics)? Would there be something like a "gov", that coordinates and enforces decisions made beforehand by individual states? Or would the gov first design nationwide things on its own, and then ask states for acceptance?

As you can see, there are multiple ways how things can be managed on a nation-level, even if states keep the upper hand (if only because they can veto everything, in the later case).... yet, in many of those variants, lobbying may be profitable, even if the "return" is not as high as in current governments?

(EDIT: I personally prefer the "higher-order" entity designing things, BUT with the lower order entities being able to veto everything, and this way implicitely encouraging a cooperative approach between both. But this doesn't address the corruption issue completely.)

everything is an interstate issue, the separate parties would be held in check by the different regional governments mutual support on issues. if two states had a border dispute involving trade, a party from a third state could be contracted to oversee and mitigate the issue, instead of the federal government itself. the separations would allow for more creative and less invasive solutions to issues between entities.

the federal government rules over all, instead of the states finding solutions that work through mutual aid, think about this distinction when reading the constitution and looking at how america works today.

the federal government should be a forum for interstate decision making and nothing more.

1. A federal "design" board, that has almost no capital (besides of a rather low income per person working on the board, and a pitiful static yearly budget for electricity bills, communications and stuff). And which's members are elected directly from the population. The board would hav no legislative, judicative and executive power, but instead purely would provide data, stats, tracking and ideas to the forum. So, pure national tracking, information and design concepts as an optional service, with no power to legislate, judge or enforce.

2. The population of a state always being able to overrule state-decisions by direct vote. That is: Normally the state governs a state's population. However, if the population is dissatisfied with certain things, then it can selectively do direct democracy. This way, not even states can strongly ignore their own population.

Sounds like the perfectly logical and defensible "let it tick until it explodes because we can't defuse it without great pain" argument.

OK, so don't stop the QE because we eventually won't be able to roll the debt. Don't raise the debt ceiling and we won't be able to roll the debt. Don't jail the guilty or fail the big banks because we won't be able to keep the system working. And on and on and on. Sounds like we are the moral hazard around here.

The pain must be felt if the wound is to be cleaned. We are down to denying the wound in order to deny the pain for just a little while longer. Either we scrub the wound clean or we die from the gangrene.

The repubs won this one. Someone needs to tell Obama, its easy. Go on T.V., state that the US Congress passed a budget to fund all of the programs in the budget. The debt celing is preventing the executive branch from executing the budget (i.e. Law) as passed by congress. In the event the debt ceiling is exceeded, the president will start cutting programs he sees fit by executive order. end of story.

In other news, repubs rejoin talks to keep the spending binge equitable.

Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

Rules of construction require a reading to give effect to all of the document - including the power of congress to raise money and authorize spending and the first amendment (which quite clearly states that we can question whatever we damn well please). The Rodent is quite right IMO.

Of course, that doesn't mean it won't happen. It's been quite a while since the Constitution really restrained any of the ass-hats in DC.

The debt is in the form of BONDS. Bonds are sold on the assurance that the government that issues them will use threat of imprisonment or death on the citizens to extract payment. Bonds are BONDAGE.

That debt is literally intended to enslave me. It is therefore illegal and void.

So much debt has been sold that we are to be enslaved for generations to pay it back, though it can never be paid back. Nobody questions whether it can be paid back. Nobody believes it can be paid back. In our dream world, it need never be paid back, just keep borrowing more and more. It will never be paid back. The only question is whether we will allow ourselves to be enslaved by the debt.

Two crimes happen when the Fed prints money and loans it to the government. The first crime is counterfeiting. When the government spends that money into the economy, that money devalues your savings and the value of your labor. The second crime is the theft of even more from the victim in order to pay back the counterfeiter with real wealth, in exchange for zero value delivered. It is the second crime that is the worst, most pernicious.

Agree they are above the law. I am just outlining a political strategy. I am indifferent to the outcome eitherway since i realize there is nothing I can do about the situation. Politically, Obama could threaten draconian cuts to republican programs to get their attention. Since he is not, I have to assume a deal is already done.

The US government is not a corporation. It may however be used like a sockpuppet by megacorps and banks.

That may sound as if there is no difference, but there is a difference: If the US gov were a corporation, and the politicians shareholders, they would have a stake in national finances. They don't, and neither do the mentioned megacorps and banks. No one except of the population is forced to be affected by consequences of the actions of the gov. A traditional government is all "The politicians decide, the population is affected."

What? They really were aware about this? What in...... this is fatal. How many of the biggest problems in human civilization, including the oh so..... "objective"... sciences..... (wave/particle dualism anyone?).... are subject/object dichotomies? Everything in civilization is fucked up because of this repeating pattern... and yet they were satisfied with a hackfix, and built an entire nation on this?

From what i have red and heard so far of the founders, i have a lot of respect for them. But if the above is true, then they knowingly fell short of addressing the root issue of everything. Crap, in the case of finances, they could at least have attempted a better patch.... like, even just affecting politician wealth by democratic means, after they did their job.

They didn't use the exact same words as you, but I have just been amazed at what I have read in the federalist papers and other writers of the enlightenment. The whole premise of a limited, self government was to try to avoid the split and its consequences.

As to finding a better patch. They did the best they could with the cacophony of voices around them and the inevitable compromises. No solution is perfect

If the US were a corporation, shareholders would be dollar holders (a dollar is a stake in the FUTURE productivity of US citizens and assets), politicians would make up the various levels of management, and the lowly peons that actually do the work and generate the revenue would obviously be the US taxpayer. Actually we are, in every way, a corporation.

Like any other corporation, we cater to the shareholders, not the laborers.